Gabelli Loses $130M, Gambles More on Spectrum

FCC’s spectrum auction process is far from perfect. Mario Gabelli, a pundit turned spectrum speculator is a perfect example of someone with deep pockets can rig the game in their favor.

The FCC’s system of auctioning off the country’s spectrum is far from perfect. Yesterday a U.S. district court approved a settlement that said New York money manager Mario “Super Mario” Gabelli and his army of affiliate companies have to pay $130 million for gaming the auction system several years back. According to the New York Times, the lawsuit was filed against the Wall Street investor by “whistle-blower, Russell Taylor III, a lawyer who was involved in the wireless spectrum auction,” five years ago under the False claims Act.

Advertisement

Gabelli, seemingly gamed the system by setting up small companies, whose sole purpose was to grab spectrum, possibly to resell that at higher prices. By claiming “designated entity” status a company can buy spectrum at a lower cost and then later resell it for a massive profit. (We have put together a list of his new bets, and you can read them after the fold.)

While the FCC has changed some of these rules, we’ll soon see how effective the new plans are. That’s because Gabelli and his crew have once again filed to bid on spectrum for the Advanced Wireless Spectrum auction, which will take place in August.

Shouldn’t there be rules that should prevent anyone who has been fined for abusing the system for trying again. We checked the records, and found a whopping 12 companies backed by Gabelli.
If any of these companies win big in the upcoming election, we can probably assume that the spectrum will get flipped shortly after. None of Gabelli’s applications were accepted yet and were all labelled “incomplete,” but the company can resubmit over the coming days. This time around Gabelli isn’t pleading the “DE” status as a leg-up, but will likely have some other money-making scheme to generate cash.

The punch line to all of this is that the FCC knew full well that this was going on during the PCS auctions and didn’t really care, since the revenues were better than expected. DG Lewis, does that answer your question?

Until the penalty reaches a dollar amount that can truly set the lawbreakers back, it will be considered the cost of doing business. “The law be damned; we can literally afford to break it. (Or more to the point, we cannot afford not to break it)”. This is not the first time we’ve seen this math done in the industry in the last 20 years.

Does anyone know why the FCC is either so close-mouthed on who actually controls bidders and licensees, or allows bidders and licensees to conceal their actual ownership so much? I dare say I can find my way through the FCC licensing and auction database as well as anyone for whom it’s not a full-time job, and trying to piece together who actually owns licenses is by no means straightforward.